Tech giant Amazon (AMZN) is up 50% over the past year, returning about double that of the S&P 500 index. One trader sees further gains in the months ahead.
That’s based on the April $320 calls. With 97 days until expiration, 14,453 contracts traded compared to a prior open interest of 146, for a 99-fold rise in volume on the trade. The buyer of the calls paid $0.29 to make the bullish bet.
Amazon shares recently traded for about $220, so the stock would need to gain about $100, or 45%, in just over three months. With shares still close to their 52-week highs of $233, such a move is unlikely.
However, shares are in an uptrend overall, and look set to continue that way. Amazon’s earnings surged 55% in the past year, and revenues rose by 11%. Cloud service demand looks strong amid the rollout of AI technologies.
Action to take: Long-term investors may want to build a position here, and use any 10% pullback or mor to add to that position. Amazon is well placed in the tech ecosystem to benefit from the rollout of AI.
For traders, the April $320 calls are aggressive, but also cheap enough that a big bounce higher in shares in the coming weeks could translate to mid-to-high double-digit returns on the option.
Disclosure: The author of this article has a position in the company mentioned here, but does not intend to trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.
